Cyprus
Securities and Exchange Commission (CySEC) has identified several areas where
regulated entities, including local investment firms and crypto services
providers need to improve their anti-money laundering and counter-terrorist
financing (AML/CFT) reporting practices.
Cyprus Regulated Firms Need
to Address Key Reporting Issues
In a
circular issued
today (Wednesday), CySEC outlined common weaknesses found in Compliance
Officers’ Annual Reports and Internal Audit Reports for 2022, submitted by
various financial entities under its supervision, including Cyprus Investment
Firms (CIFs), Crypto Asset Service Providers (CASPs) and more.
“Particularly,
it was observed that the information provided in the Compliance Officers’
Annual Reports is merely the result of the inspections and reviews performed
with no reference to the method of the inspections and reviews that were
conducted,” CySEC commented.
The
regulator also noted that some reports lacked detailed descriptions of
identified deficiencies in AML measures. CySEC argues in the document that
general overviews are not enough. It wants to see specifics on weaknesses,
their implications, and proposed remedial actions with implementation
timelines.
Another
area of concern was inadequate information on high-risk customers. The
regulator emphasized the need for comparative data on the number, origin, and
type of high-risk clients, year-over-year.
The
circular also stressed the importance of thorough documentation on systems for
ongoing account monitoring. Regulated entities
should also present sufficient information on the next year’s training program
for the Compliance Officer and staff, and provide adequate information on the
Compliance Officer’s Department structure and duties. What is more, companies
like CIFs and CASPS should ensure that Board of Directors’ minutes include
implementation timeframes for corrective measures addressing identified issues.
CySEC Fights Windmills
The
regulator’s findings are part of its annual risk-based assessment, which aims
to ensure that financial institutions maintain strong defenses against money
laundering and terrorist financing. This isn’t the first time CySEC has
highlighted this issue; a
similar assessment was observed over three years ago. Although the
regulator is taking action, these measures seem not to be producing the
intended effects.
CySEC
warned that recurring weaknesses would undergo “rigorous compliance
checks” and reminded entities of potential administrative sanctions for
non-compliance. This is not just a threat, as such penalties have been paid in
the past. For example, in February, CySEC
fined Fintailor Investments €200,000 for potential breaches of regulations
related to the prevention of money laundering. A few months earlier, Freedom
Finance paid €50,000 in a similar case.
The latest
penalty imposed by the regulator, amounting to €200,000, was however not for
breaches related to AML/CFT but for offering excessively high financial
leverage. CySEC claimed that IC Markets offered clients leverage of 1000:1,
significantly higher than European regulations allow. However, IC Markets
denied the grounds of the regulator’s decision, announcing plans to appeal.
This article was written by Damian Chmiel at www.financemagnates.com.
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